Allota Results - Buying Tips


	Buying a House Before you look for a house, it's essential to determine how much you can afford to pay and what your financing options are. You'll also need to define your housing priorities and understand how to easily find homes that meet your needs. Even if you think you've found your dream home, you'll need to master the ins and outs of house inspections and making offers. Here you'll find some answers that will help you find your way through the house buying maze -- taking advantage of the numerous resources available on the Web. Click here for useful inspection tips. Qualifying for a Home Loan Accurately determine how much house you can afford, and learn why a good credit score and loan pre approval are critical. Accurately determine how much house you can afford, and learn why a good credit score and loan pre approval are critical. It's essential to consider how much you can afford to pay before you look for a house. Considering affordability early on will save you time and money because you won't bid on unattainable houses or apply for loans that are out of your ballpark. It will be easier to get a loan and, if necessary, you will be able to take creative steps toward improving your financial and credit profile. Check Your Credit History When reviewing loan applications and making financing decisions, lenders typically request that the credit bureaus reporting your file -- Equifax, Experian, or TransUnion -- provide your credit risk score (also known as your FICO score, named after Fair, Isaac & Company, which developed many of the computer scoring models). This seemingly mysterious number represents a statistical summary of the information in your credit report, including: your history of paying bills on time the level of your outstanding debts how long you've had credit how many credit cards and loans you have your credit limit the number of inquiries for your credit report (too many can lower your score, though they've refined the program so this is less of a problem than it once was), and the types of credit you have. The higher your credit score, the easier it will be to get a loan. If you routinely pay your bills late, you can expect a lower score, in which case a lender may either reject your loan application altogether or insist on a very large down payment or high interest rate to lower the lender's risk. For more information, see Credit Scoring in the Credit Repair area of Nolo's Legal Encyclopedia. Because your credit history has such an important effect on the type and amount of mortgage loan lenders offer you, always check your credit report and clean up your file if necessary -- before, not after, you apply for a mortgage. Loan Pre approval vs. Loan Pre qualification Once you've done the basic calculations and completed a financial statement, you can ask a lender or loan broker for a pre qualification letter saying that loan approval for a specified amount is likely based on your income and credit history. Pre qualifying lets you determine exactly how much you'll be able to borrow and how much you'll need for a down payment and closing costs. Many of the mortgage web sites have pre qualifying calculators to help with this task. Unless you're in a very slow real estate market, with lots more sellers than buyers, you will want to do more than pre qualify for a loan: You will want to be pre approved -- that is, guaranteed -- for a specific loan amount. This means a lender has already checked your credit and evaluated your financial situation, rather than simply relying on your own statement about your income and debts. Pre approval means that the lender would actually fund the loan, pending an appraisal of the property, title report and purchase contract. Having a lender pre approve you for a loan is crucial in a competitive market -- without it, you stand little chance of your offer being accepted. How Much House Can You Afford? As a broad generalization, most people can afford to purchase a house worth about three times their total (gross) annual income, assuming a 20% down payment and a moderate amount of other long-term debts, such as car or student loan payments. With no other debts, you can probably afford a house worth up to four or even five times your annual income. Lenders have traditionally wanted you to make all monthly payments using no more than 28% to 38% of your monthly income. (If you have an excellent credit record, however, they might allow you to go more deeply into debt.) In other words, if your monthly income is $2,000, the lender would want you to pay no more than $760 (.38 x $2,000) toward all your debts. The percentage depends on the amount of your down payment, the interest rate on the type of mortgage you want, your credit history, the level of your long-term debts and other factors. Generally, the greater your other debts, the lower the percentage of your income lenders will assume you have available to spend each month on housing. Conversely, if you have no long-term debts and a great credit history and will make a larger than normal down payment, a lender may approve carrying costs that exceed 38% of your monthly income. Online Mortgage Shopping Plug into the Web world of home mortgages, loans and lenders. A growing number of consumers browsing the Web for housing are taking side trips to look for the perfect mortgage. Though most customers prefer to complete their loan transaction with a "live" mortgage broker or lender -- and many mortgage web sites have gone out of business as a result -- the Web still offers 24-hour convenience when it comes to researching your options. Here, we explore the benefits and alert you to the potential pitfalls of shopping for your mortgage online. Mortgage Information ("No-Loan") Sites Mortgage web sites come in two basic flavors: those sites that don't offer loans (called "no-loan" sites) and those that do. No-loan sites don't broker or lend mortgage money, but typically provide mortgage content, information and news as well as mortgage rates -- just what most mortgage shoppers want and need. Sites like HSH.Com and Bank Rate Monitor (www.bankrate.com) keep daily tabs on mortgage rates, indexes and market events that push costs up or down. You can visit sites like these to obtain the latest regional average rates on purchase, refinance, equity and other mortgages. Offering vast libraries of mortgage information for consumers, these sites are also a great place to examine mortgage programs, learn mortgage lingo, understand underwriting, get questions answered about the loan qualification process, crunch numbers with online mortgage calculators, check your credit and obtain other pertinent information, such as market trend analyses, forecasts and a host of other useful features. No-loan sites are also referred to as "referral" sites because they introduce you to a host of participating lenders, either through advertisements or links embedded in the content. The referrals could be useful, provided you gather enough of them to adequately compare loan costs. In the no-loan site category, don't overlook informative government, quasi-government and trade sites, including Fannie Mae (www.fanniemae.com), Freddie Mac (www.freddiemac.com), the U.S. Department of Housing and Urban Development (www.hud.gov) and Mortgage Bankers Association of America (www.mbaa.org). These sites offer information about the latest mortgage programs, conforming loan amount changes, and general consumer and industry information. They also offer complaint services for mortgage problems on or off the Net. Mortgage Money Sites Online mortgage loan sites that offer direct access to loans come in three basic varieties: direct or single lenders, auction sites and multi-lender shopping sites. Direct or single lender sites. Most mortgage web sites are direct lender sites. These include mortgage lenders such as Countrywide (www.countrywide.com) as well as all-purpose banks that make mortgage loans, like Wells Fargo (www.wellsfargo.com) and Bank of America (www.bankofamerica.com). If, for whatever reason, you've already decided to borrow from a particular lender, you might consider visiting its web site. Simply search for the name of the financial institution you are interested in to see what's available or check the online real estate section of your local newspaper. Many of the direct lender sites offer general consumer information, but it's impossible on the Web to compare rates among them. These lenders rarely provide complete product price information that includes points, fees, lock periods and the like. Auction sites. Some mortgage sites allow you to complete a loan application, which is then sent to lenders who, in turn, compete for your business. Some of the lenders are sub-prime lenders, making these sites a possible choice for you if your credit is damaged. You won't get immediate feedback but must wait a day or so for several offers. To compare more loans, you'll have to repeat the process on each site. Auction sites include LendingTree.com, GetSmart.com, and RealEstate.com. Multi-lender shopping sites. With multi-lender shopping sites, it's not necessary to complete an application before you shop for a mortgage using more variables than some brokers use. You enter the loan amount, property details and other information and you'll get current rates, APR, points, even settlement costs for each loan from dozens of lenders. You can sort loans by each factor. You can also put loans side-by-side and make apples-to-apples comparisons of interest rate adjustments, margins, life caps, year-by-year payment totals and interest costs and tax benefits. You can even compare the home as an investment with other financial investments. If you choose to complete an application, mortgage shopping sites review your application, process the required documentation and ship your loan to the lender for further review and underwriting. Be warned, however -- many consumers report dissatisfaction with multi-lender sites, saying that they get second class treatment and end up having to contact the lender directly in the end. Tips for Purchasing a Mortgage Online Window shopping for online mortgages is a lot easier than actually completing the process electronically. A confusing array of mortgage site types, mortgages that simply aren't a good fit for automated underwriting (best suited for assembly line, cookie-cutter loans such as refinanced and equity mortgages for borrowers with excellent credit) and consumers' own technophobes thwart many from cashing in on the proliferation of online mortgages. Home purchase mortgages involve two parties and a longer, more complicated escrow process (that's the time between signing a contract and transferring ownership). If something goes wrong, the computer can't sit down with you and work it out. Likewise, if you have bad credit, a loan specialist will have to decide if you can qualify for a more expensive sub-prime loan and, if so, which one. Unfortunately, mortgage web sites typically don't work well for shoppers with less than topnotch credit. Also, first-time home buyers often need a lot of hand-holding that a cold Internet interface can't provide. Still other consumers have security concerns and avoid online mortgages. Before you complete an online mortgage application for a purchase, refinance or equity loan, consider these tips: Get briefed on the mortgage process. Attend a mortgage workshop, seminar or class or sit down with a good book or traditional mortgage broker. Choose an online broker licensed and regulated by your state. (See State Real Estate Departments and Commissions.) Your state's regulatory agency may be at a loss to handle problems with outside lenders. Check out the lender, too. The broker finds your loan, but a lender underwrites and finances it. Verify the online lender's status with the Federal Deposit Insurance Corp. or another federal regulatory agency that governs mortgage lenders. Use online technology to your advantage. Shop around using online brokers, "click and mortar" brokers (who are both on and off the Net) and traditional "brick and mortar" brokers and lenders. Get the best rate and terms before you apply. Off-line lenders know online lenders can be competitive and they will try to offer you a better deal. Don't be taken by the ease of completing applications online. Do your research, complete one when you've found the loan you want -- and then stick with it. Each subsequent application triggers another credit check and lenders could reject your applications if your credit report reveals numerous credit checks in a short period. Don't complete an online mortgage application if you can't follow through. If you fill out an application at work but don't have Internet access at home, you'll defeat the purpose of the automated online mortgage process. Online brokers use e-mail to help you track your mortgage's progress and to advise you of interest rate fluctuations. Some sites allow you to track your mortgage application's progress and funding online. Get a rate lock. Online or off, a rate lock -- in writing -- guarantees you a certain rate and terms for a given period of time. Consider security issues. It is possible, but not very likely, that someone might steal your online mortgage application information. But it's probably a lot easier to break a window at your mortgage broker's office and ransack the files than it is to hack into a heavily secured online mortgage site. Beware of come-ons. Use the same diligence when you shop online as you would shopping elsewhere. The same teaser-rate, bait-and-switch and small print games that occur off-line unfortunately also exist on the Web. House hunting Online Find the best online listings of houses for sale. Thanks to the Internet, home buyers no longer have to rely solely on real estate agents for information about homes for sale. Scanning listings to see which homes are worth a visit, how much they cost and what they offer is now as easy as turning on your computer. You can find listings of both resale and new homes based on location, price, size, amenities and other criteria you key in. Virtual visits to new homes often include floor plans and photographs. The newest enhancements to these sites include virtual "fly-throughs" that let you zoom in, out and around in 360-degrees for panoramic views of homes and the rooms within. Once you identify a house that's to your liking, you can e-mail the address or identification number to your agent, the listing agent or the owner (if it's a listing by a FSBO -- For Sale By Owner) to obtain additional information or to set up an appointment to see the home in person. National Listings of Homes for Sale Among the most frequently visited national real estate listing sites are the National Association of Realtors' Realtor.com operated by HomeStore.com, Microsoft's HomeAdvisor.com, Homes & Land's Homes.com, and CyberHomes.com. These sites offer interactive maps to locate neighborhoods and useful links to real estate broker web sites. Realtor.com claims to have the most listings, nearly 2 million, but many of these national sites share the same listings. Some are stronger in certain geographic areas, most provide e-mail features to notify you of new listings that meet your search criteria and all of them have a host of related realty services from mortgage shopping to neighborhood information to escrow assistance. They are a boon to real estate consumer education. National sites give you the most return for your time because of the sheer volume of listings. Given the enormous size of the databases, however, access times can be slow, numerous mouse clicks are often necessary to arrive at a single listing and once you arrive, if the home is in a hot market, the listing could be sold, expired or otherwise unavailable. Browsing for Housing by State or Region Your state or regional realty association or multiple listing service (MLS) also likely offers a web site of homes for sale. California buyers should check out California Association of Realtors' useful California Living Network (www.ca.realtor.com). Along with real estate listing information from nearly every Multiple Listing Service in California, it offers community and travel information, an agent selection service and a guide to local schools and related Web links, all in both English and Spanish. Be sure to check smaller, easier-to-manage local and regional MLS-type sites, which are more likely to contain current listings, especially if the site is managed by the local multiple listing service or realty trade group. Surfing Realty Company Sites Major real estate companies, including ERA, RE/MAX, Coldwell Banker, Prudential and others also offer company listing sites. Typically, each listing points to the individual local office, branch or franchise that actually holds the listing. At that level, you can find as few as a handful of listings held by, say, an individual broker or small office. To compensate, the sites often link out or form an alliance with a larger online listing service. If, for whatever reason, you like shopping brands, these sites are for you. When you get down to the broker level, some of the best sites offer detailed photographs and downloadable flyers with extensive listings information, buying assistance and informative content. Virtual Realty Agents The Internet has spawned a new breed of real estate agents. These agents operate from a web site rather than an office, but take their cue from brick and mortar discount brokers. These so-called "click and mortar" brokers typically offer their own listings and align themselves with a larger online MLS or listing site. They often distinguish themselves from traditional agents by charging smaller commissions, sometimes in the form of rebates or a fee-for-service, pay-as-you go system. Companies such as zipRealty.com, eHome.com, and Homefox.com attempt to automate as much of the real estate transaction as possible and pass savings on to consumers. More and more small, independent mom-and-pop brokerages and brokers who work solo are likely to evolve into virtual agents, if only to cut costs for themselves. The discount approach, however, often leaves virtual agents' sites with rudimentary content and few ancillary services. Newly Built Homes Homestore.com also operates the National Association of Homebuilders' web site, Homebuilder.com, with listings of newly built homes and developments in major metropolitan areas. You can search new houses by city, price range, minimum number of bedrooms and baths and size of the home, move-in date, or other variables, such as whether the home is part of a gated or adult community. You can view floor plans, elevations and color photos and check for details on amenities such as pools or tennis courts. If you want to focus on a particular area or city, you can easily see all new homes available in participating developments. Little online web site competition exists among the new home sites, with most builders offering their own listing sites. Another major site, NewHomeNetwork.com, includes some crossover builders from Homebuilder.com. For Sale by Owner Online Owners.com is the site to see for homes sold without a broker, also known as FSBOs (for sale by owner). Simply enter the location (state, city, county or metropolitan area), the type of property (such as house or condominium) and the minimum number of bedrooms to see FSBOs that meet your criteria. While the Owners' Network has limited listings, you just might find the perfect home that meets your needs. The site recently partnered with Prudential, a national real estate company, to give both buyers and sellers the option of working with an agent at a discount. Owners.com offers some of the best features found on a major national real estate listings site. Old Media, New Resources Virtually all online editions of newspapers offer a homes-for-sale classifieds section that works much like an online listing site. The regional nature of real estate makes newspapers a natural for such a service. Along with the listings, editorial staffs offer objective editorial content with current information that could affect your transaction. Newspapers tend to do a better job of reporting on the news than keeping listings current. On most newspaper listings sites, you can browse all the listings, or customize your search by typing in your criteria, such as price range, location and number of bedrooms and baths. Some of the best sites also include useful information on mortgage rates, schools and other community resources, financial calculators, links to sales data on comparable houses, home inspection services, real estate agents and other information of interest to local buyers. Check the Newspapers Association of America (www.naa.org) for a link to your newspaper. (Click on "Newspaper Links.") Final Word To get the most out of your Internet home search, use it in conjunction with traditional home shopping techniques. Attend home buying seminars and workshops and consider obtaining the assistance of an experienced, professional real estate agent or attorney. When it comes to deciphering all the information you'll encounter online and off, you'll need plenty of help. New Houses How to avoid pitfalls when buying a new house. There's something very appealing about a brand new house -- you get to pick out the carpet, drapes and appliances, and have things designed just the way you want them. New houses are sometimes priced more reasonably than comparable old ones, often come with more space and better appliances, require less immediate fix-up work and are more energy-efficient. To get a good sense of new house development, visit www.homebuilder.com. Too often, though, the advantages of new houses are overshadowed by problems such as shoddy construction and lengthy construction delays. Here are some suggestions on how to avoid problems. Choose the Developer, Then the House The most important factor in buying a new house is not what you buy (that is, the particular model), but rather who you buy from. In other words, don't buy a house -- buy its builder. To check out a builder, talk to: Owners who live in the development you're considering or in a recently completed development by the same builder. If you are considering a development run by a homeowners' association, talk to existing owners -- association members -- and the board of directors. They are especially insightful sources of information. An experienced contractor or home inspector. Have him look at the house you're considering for the quality of construction. If your house isn't built yet or is already finished, have him look at other houses the developer is in the process of building. When a house is being done, it's easy to see if construction standards are high or not. County planning or building department staff who deal with local developers. For the best results, ask your questions positively. "Do Brady and Jones finish their projects on time, with few complaints?" will probably be answered candidly, but "Is it true Brady and Jones is a real shlock outfit?" might not be. Real estate agents who've worked in the area for some time. Agents won't usually deal directly with new house sales, but they may have handled the resale of houses built by developers and may know their reputations. The state or local licensing or consumer protection agency that oversees contractors, and the local Better Business Bureau. Ask about complaints filed against the developer. Be Wary of Optional Add-Ons Many developers advertise houses at comparatively low prices to get you to come out and have a look. Once there, commissioned salespeople show you models loaded with expensive extras such as spa, fireplace, high quality carpet and giant bathrooms. If you become seriously interested, the advertised price will rise as the developer tries to sell you the extras. Buying extras lets you semi-custom design your home. But ask yourself what you really need and how much it will cost. Upgrades often add 5% to 20% to the cost of a new home. To get the most for your money, follow these steps: Take Care of Essentials First Be practical. More electrical outlets, a fenced yard (especially if you have children or pets) and, in many areas, air conditioning, are day-to-day necessities. A fireplace and a hot tub are not. Make Sure Prices Are Fair Some developers are less ethical in pricing extras than others. Steer clear of those who deliberately use poor-quality materials in highly visible spots in their models, almost forcing you to upgrade to overpriced substitutes. Negotiate Ask for one free extra for every two you buy. For example, if you pay top dollar for good carpets, tile and kitchen cabinets, ask the developer to throw in a better stove at no charge. And don't be afraid to ask for the right to buy and install extras on your own. Investigate Warranties You've probably heard horror stories about new houses that begin to disintegrate soon after the buyer moves in -- the roof leaks, the basement floods after the first big rain, or the doors won't close. This shouldn't be a problem if you buy from a reputable developer -- but not all developers are reputable. Your best bet is to buy from a developer who includes a new house warranty from an independent insurance company. Typically, they cover workmanship and materials for one year; plumbing, electrical, heating and air conditioning systems for two years; and major structural defects for ten years. You can also buy a warranty on your own, but it probably won't cover major structural defects. A typical warranty begins at the end of the first year you own your new home and runs four years. It costs about $500 for a single family home, with a $50 deductible for each claim. These warranties are often of questionable value because, much like extended warranties on cars and appliances, civil remedies for poor workmanship are already in place. Read the Contract Carefully Many new house contracts contain a clause saying that the model's features, such as carpets and appliances, are not necessarily the same brands you'll receive. You are guaranteed only the functional equivalent of what you see, which is typically different and costs the builder far less. Make a list of the precise features you're concerned about (with brands or makes and models) and include it in your contract. If one developer won't accommodate you, shop elsewhere. Get It In Writing When dealing with a developer's sales representative, get all promises as to what will be done, and when, in writing. Before you sign the purchase contract, make sure it includes all agreed-on changes. If you've already signed the contract when you negotiate changes, write them down in a separate document. Don't rely on oral commitments, which are notoriously unreliable and almost impossible to enforce. Protect Yourself Against Delays It's always best not to close escrow on a new home until the work is completed, or you could move in on top of late or unfinished construction. Some hot markets don't give you that option. If you agree to buy a house that isn't finished (or even started), you'll be asked to sign a very one-sided contract. You'll be given numerous deadlines (to make deposits, agree to design changes, get loan approval, sell your present house and close escrow), but the developer will have great leeway -- sometimes up to a year from the target date -- to deliver the house. Do what you can to negotiate a fairer deal. Most important, you want to establish a reasonable date at which you can cancel the contract and get all of your money back if the developer doesn't deliver the house. Again, get it in writing. Before escrow closes, inspect the house, and don't pay your money (close escrow) unless everything is complete to your satisfaction. If you must close escrow because you need to move in, but significant and costly work remains, insist that the necessary funds be taken out of what you're paying the developer and placed in a trust account after escrow closes. Then ask for a written agreement stating that if the work is performed on time, the money will be released to the developer; but if it isn't, the funds go to you to hire someone else to do the work. If the developer refuses, at least make a list of what needs to be done, assign a completion date to each, and have it signed by the developer. If the developer fails to make a good faith effort to do the work, you may be able to sue in small claims court if you have out-of-pocket losses, such as rent or hotel bills, because you could not move in on time. Homeowners' Associations and CC&Rs When you buy a house in a new subdivision or planned unit development, you may be subject to a host of rules and regulations. When you buy a house in a new subdivision or planned unit development, you may be subject to a host of rules and regulations. When you buy a good home in a new subdivision, common interest development (CID), planned unit development (PUD), or co-op, chances are good that you also automatically become a member of an exclusive club -- the homeowners' association, whose members are the people who own homes in the same development. CC&Rs The homeowners' association will probably exercise a lot of control over how you use your property. Deeds to houses in new developments almost always include restrictions on how the property can be used. Usually, these restrictions, called covenants, conditions and restrictions (CC&Rs), put decision-making rights in the hands of a homeowners' association. If you don't understand something, ask for more information and seek legal advice if necessary. Some associations enforce every rule with the enthusiasm of a Marine drill sergeant; others are run in a far more relaxed way. Most associations are very sensitive to making decisions which will enhance the value of the houses. Study the CC&Rs carefully to see if they're compatible with your lifestyle. CC&Rs commonly limit the color or colors you can paint your house (often brown or gray), the color of the curtains or blinds visible from the street (usually white) and even the type of front yard landscaping you can do. Some even require that garages facing the street be kept neat, insist that laundry be dried indoors rather than hung on a line, prohibit basketball hoops in the driveway or front yard and prohibit parking RVs or boats in the driveway. These rules may be fairly general, but more often they are excruciatingly detailed. As the list below shows, homeowners' associations often have power over many aspects of everyday life. Getting relief from overly restrictive CC&Rs after you move in isn't usually easy. You'll likely have to submit an application (with fee) for a variance, get your neighbors' permission and possibly go through a formal hearing. And if you want to make a structural change, such as building a fence or adding a room, you'll likely need formal permission from the association in addition to complying with city zoning rules. Maintenance Fees Homeowners' associations can often assess mandatory fees for common property maintenance, which can get expensive if the development has a pool, golf course or other recreational facility. Many associations in housing developments let their boards raise regular assessments up to 20% per year and levy additional special assessments with no membership vote for a new roof or other capital improvement. If you're on a tight budget, check the homeowners' association membership fee and how easy it is for the board to increase the amount. Also, if parts of the development have been occupied for a while, attend a homeowners' association meeting and talk with the officers about financing and other issues of concern. What Homeowners' Associations May Regulate: basketball hoops house design sheds clotheslines, lawns, shingles exterior paint, mailboxes, swing sets fences, noise, trees garages, outdoor lights, TV antennas garbage cans, views, window coverings hedges, weeds home businesses, pools, wreaths pets (size or even acceptability)